The Detroit debacle…

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With GM ready to hive off its Hummer operations, Chrysler no longer showing much interest in its Jeeps business and Ford rethinking its F series vehicles, there is serious shift in American car buying patterns. It was just a few months back that the Detroit three were still so much infatuated with the SUV dream. Today, after back breaking losses year after year [GM, FY 2006 largest global loss making company; Ford, FY 2007 largest global loss making company], a future based on SUVs is beyond the realm of even dreams. Of course, the Audi Q7, Porsche Cayanne Turbo S, Cadillac Escalade range of SUVs would continue ad infinitum, for the obnoxiously snobbish class they attract would continue to demand these cars, irrespective of fuel prices. But a mass strategy with SUVs? I’ll then need more space on my shuttle. Since the first quarter of 2005 [when the US SUV sales plummeted a whopping 20-30%], sales have only been declining!

There is a fare amount of insecurity among the end consumers, who have found their money incomes depleted with respect to the purchasing power. As per a survey by National Association of Convenience Stores, 45% of American consumers reported a decline in their spending power because of rising petrol prices. While 19% wanted to buy a more fuel efficient car, an astonishing 13% had already reduced their driving on the back of $3/ gallon gasoline prices! As a result of the earlier oil shocks, consumers have increasingly adapted an ‘aftermath attitude’ and eventual demands for automobiles have sagged significantly through out the world.

Even though the idea of hybrid cars is generally believed to be more of a lifestyle concept rather than being that related to fuel efficiency, a total of 38,214 hybrids were sold in the American market alone in March 2008, proof that even fashion is now related to oil. Hybrid SUVs such as Ford Escape Hybrid had initially gained popularity but not for long, since better alternatives are beginning to hit the market. Though oil prices will eventually come down [on a downward spree, they had broken the $90 mark per barrel on October 6, 2008], the mentality of consumers – who were once used to $50 per barrel prices and who would be extremely averse to future vagaries of oil price hikes – would remain focused on fuel efficient cars. While the Japanese per se have succeeded with their fuel efficient taglines and the prejudices they had been associated with through out their history, the Americans still seem to be reading the Big Moose chapter in Archies too many times for comfort. But if misery loves company, one should say there’s at least one tubelight in the land of the rising sun fighting to switch itself off... er, whatever! Basically, if Mitsubishi Outlander is a top seller, I’ll eat my cook’s food... Is this going to be printed?!

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Source : IIPM Editorial, 2008

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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When will the future come, Sir?!

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Next, let’s talk about competition. The scenario for AEBC is not getting any easier in the country with all multinationals and national players like Citi, Standard Chartered, ICICI Bank, SBI et al eyeing the large untapped credit card market pie. To first talk about the national banks, ICICI Bank has established a huge reach by issuing credit cards across 125 cities. SBI being the largest bank in the country with over 19,000 branches, has its credit card business spread across 110 cities across the country. Amongst MNCs, Citibank is the most widely present with its operations spanning 40 cities. The bank further plans to take the count to 94 cities in which group company Citi-financial operates. In this regard, AEBC faces an uphill task with its strategy of focusing on just the high-income segment, with offices only in ‘four’ cities preventing it from reaching out to anyone beyond audiences in the Tier I and Tier II cities. While this puts a constraint on AEBC’s growth, the other players in the market are merrily grabbing larger chunks of the market while at the same time poaching on AEBC’s customer base. So is the giant planning to move beyond to smaller towns as well? Not soon, as Dutta professes, “As of now we plan to concentrate our operations only in the four cities – New Delhi (including Gurgaon), Mumbai, Chennai and Bangalore. In the coming future we might plan to take our services to Tier I and Tier II cities...”

When will the future come, Sir?!

The competing banks have not only raised the bar in terms of both quality and customer services, but they also have formulated aggressive growth strategies to bag-in higher spending on cards. Moreover, keeping aside the segment they cater to, AEBC has a lot of catching-up to do where customer base is concerned (Refer box titled ‘Plastic... Dangerous?!’). Operating as an restricted entity, AEBC’s role has been limited to just marketing and distribution of co-branded credit cards with little exclusive identity of its own.

When it comes to marketing plans, the entity has some in its bag. It has developed a closed-loop ‘global’ network with 1,700 locations in more than 130 countries, which enables it to effectively design global marketing programmes and benefits for card members in association with merchants. It has clubbed its products and services with various facilities like Protection Package, Membership Travel Services, Membership Rewards Programme et al to attract more eyeballs... “We did an in-depth study to understand the mindset of affluent customers in India. We used these insights to tailor our products and services,” explains Hennin. Well, here the player does not lack what some of its competitors do. Its ads are loud and frequent, therefore ensuring maintainence of the ‘trusted’ brand appeal for AEBC. The player is also looking to build the most extensive network of sales, service infrastructure and collection mechanism for credit cards to boost its services.

Though officials claim negligible credit defaults in India, the increasing outstanding on credit cards (which went up by a massive 87% to touch Rs.265.96 billion by May 2008, as per RBI) clearly threatens to spoil the party for AEBC. This also further threatens to worsen AEBC’s earnings India-specific (and global thereof) figures in the short-to-mid term; a repeat of what happened in the most recent quarter (Q2, 2008) when its earnings fell globally by 37% q-o-q to just $653 million after it was left with no option but to ‘set aside’ earnings to cover up for credit losses on worse-than-expected consumer defaults.

“The darker side of the story says that in course of utilising the facilities provided by credit cards, one keeps on postponing the payment, due date after due date. Many of these users then finally refrain from any future payment, thus hurting credit card players where it hurts most,” explains Robin Roy, Associate Director, PwC. To add to this, AEBC also lacks retail banking facilities, as other players can back their collection activities through their account holders’ deposits and savings. Thus it becomes imperative for players like AEBC to keep an eagle eye on its customers. With McKinsey predicting that by 2010, India would have $7 billion in credit cards outstanding, AEBC has to be more than careful in choosing its clientele! For now though, it’s got to expand beyond just four cities! Four might be even, but it’ll not help AEBC get even with challenges and challengers!

For more articles, Click on IIPM Article.

Source : IIPM Editorial, 2008

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles.
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Google Chrome, rather than a stand alone strategy, seems to be another step towards making Windows more irrelevant, says arun roy

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Harry S. Truman, former US President, once said that he preferred one armed economists so that they would not be able to say, “On the other hand”! But let’s not blame economists for the way they insure themselves from the embarassment of being proved wrong in their assessment. Predicting the future with certainty isn’t exactly a walk in the park for anyone.

Take, for instance, the uncertainty surrounding the fate of the internet browser Chrome, Google’s latest salvo at Microsoft. Industry experts have started discussing of its future and aspirations. A number of tech bloggers have already started analysing whether Google Chrome will be able to dethrone Microsoft or kill Mozilla. There’s a general consensus as to what Chrome means, namely, it is Google’s way of eroding Microsoft’s dominance in the browser market. An analyst has quoted Google as an 800-pound gorilla, and when an 800-pound gorilla jumps in the pool, it tends to makes ripples. But will Chrome really give IE8 and Firefox a run for their money?

Google Chrome, a “fresh take on the browser”as the company claims it to be, does have some interesting features, differentiating it from other browsers available in the market. The most important feature it offers is its high level of user friendliness and keeping each tap in an isolated “sandbox” to prevent one tab from crashing another, and improve protection from rogue sites. The browser’s JavaScript engine enables the software to run the applications in a faster mode compared with other engines.

In an era, where Internet has become the primary medium to get connected across the world or real-time access to information, the importance of the web browser industry remains inevitable. “Google’s foray in the browser industry depicts more of its vertical expansion strategy. The dominant factor will be decided by the business models or long term strategies that Google would adapt to dent Microsoft’s dominance in the industry” avers Shushmul Maheshwari, Chief Executive, RNCOS E-Services Pvt. Ltd.

Some experts feel that this is merely a part of a larger strategy by the search engine giant. “Google only dominates in one area and that is in online ad revenue due to their search engine. Chrome isn’t initially designed to dominate the browser industry; it is designed to be a front end for an emerging application class,” says analyst Rob Enderle, Enderle group. Chrome’s main target is more Windows and Office than it is Internet Explorer (IE) initially. Chrome is designed to help make Microsoft Office obsolete and make Windows irrelevant.

For more articles, Click on IIPM Article.

Source : IIPM Editorial, 2008

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles.
IIPM Programme :- SUPERIOR COURSE CONTENTS
Now IIPM's World-Class Education... for everybody!!
IIPM INTERNATIONAL - NEW DELHI, GURGAON & NOIDA
IIPM - Admission Procedure
IIPM, GURGAON
IIPM : EXECUTIVE EDUCATION
IIPM’s 36th Glorious Year of Academic Excellence
4Ps Power Brand Awards 2007
Why Study Abroad When IIPM Gives You 3 global Advantages!
IIPM Ranked No. 1 B-School In Global Exposre - Zee...